Industry leaders call for truce on disputes and pay less notices

Aaron Morby 2 months ago
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Construction leaders have urged the whole industry to unite in calling time on disputes and commit to keep cash flowing through the supply chain.

CLC chairman Andy Mitchell says construction leaders are concerned that several firms have chosen to unilaterally delay payment or extend credit terms
CLC chairman Andy Mitchell says construction leaders are concerned that several firms have chosen to unilaterally delay payment or extend credit terms

In an open letter to construction businesses, the Construction Leadership Council has called on the industry to embark on its own self-help programme to get through the coronavirus crisis.

It comes as evidence grows that more subcontractors are being hit with delay and payless notices as they battle to get workers to site and work in safe conditions during the lockdown.

It will be the first real test of the CLC’s influence over the industry, and specifically the behaviour of clients and major contractors which hold most sway at the council.

Andy Mitchell, co-chair of the CLC, states: “There are a number of businesses that have chosen to unilaterally delay payment or extend credit terms. We do not believe this is acceptable or appropriate – particularly at this time of great stress.

“We are increasingly concerned about the management of payment in the supply chain.

“All construction businesses should continue to pay in accordance with agreed contractual terms and firms should not be threatening to invoke penalty or other contractual clauses. ”

He adds: “Our joint priority must be to sustain the industry.  All firms should think hard about how their reputation could be damaged by not doing the right thing during these difficult times.”

So far the CLC has focused on setting out safe site working guidelines and pressing the Government to provide additional support to keep construction companies afloat during the current crisis.

The decision to call for the industry to drive its own cultural payment reform reflects growing concern that the industry could become its own worse enemy.

The letter notes that where the industry is asking for substantial support from the Government, it is less likely that this support will be forthcoming if the sector has not demonstrated that any benefit will be fairly distributed to all parts of the industry.

It also warns on the reputational damage to individual businesses that seek to punish contractual partners.

“Our actions at this time will be remembered.  All firms should think hard about how their reputation could be damaged by not doing the right thing,” Mitchell adds.

One industry expert said: “Private developers are the big concern. A lot are going missing at the moment leaving main contractors in a difficult position.”

And one specialist added: “The Government should threaten to remove main contractors from its Job Retention Scheme is they aren’t paying suppliers.

“You can’t take tax payers money to pay your staff then hold onto it all and screw your supply chain.”

Mark Beard, chairman of Beard, and senior vice-president of the CIOB, said: “The Construction Leadership Council is absolutely right to highlight this important issue. I stand 100 per cent behind them.

“The construction industry depends on its supply chain and main contractors have a responsibility to ensure they do everything they can to support suppliers in these extraordinarily difficult times.

“At Beard, we have always been proud of our record of paying suppliers on time: in the last year we have succeeded in bringing average payment times down from 29 days to 27.

“The active support of our supply chain has been central to our own success and growth. Many, many subcontractors and individual craftsmen have gone above and beyond what we could have reasonably expected to comply with Government’s two-metre distancing rule. We will not let you down now.”

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